Reported by TechCrunch AI
Reddit has long attracted millions of users to its site through Google, with many even appending the word “Reddit” to their search queries for better answers. But as search traffic dries up amid the shift to AI-powered search, Reddit is rethinking its relationship with the open internet. In its third-quarter earnings on Thursday, the company announced it’s transitioning to a primarily “logged-in experience.”
The move is designed to protect its data from AI scraping, allowing the company to instead forge lucrative licensing deals with model providers. But just as important, such a shift could help Reddit to increase its revenue even as it faces daily active user declines in its largest market, the U.S.
Overall, Reddit’s global daily active users were flat quarter-over-quarter in Q3, reaching 130.3 million, while U.S. daily active users dropped from 53.2 million in Q2 to 50.7 million in Q3 and were down 2% year-over-year.
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The company is not alone in seeing such declines; the shift to an AI-centered web has impacted most websites and publishers by now, leading to fewer click-throughs, as AI summaries provide answers that don’t require website visits and Google’s traditional “ten blue links” have reduced relevance. (The change is now even impacting Google’s bottom line , its earnings revealed.)
But at Reddit’s scale, the numbers associated with such a decline are enormous. The comapny said search traffic referrals dropped by more than 1 million referrals on average per week in October. It warned that if the trend continues, daily active users could decline to a low-double-digit percentage by next quarter. (To play that out: a hypothetical 10%–12% decline could bring Reddit to roughly 115 million–117 million daily actives, down from 130.3 million in Q3. That’s a huge drop!)
At the same time, Reddit has gotten significantly better at monetizing its audience even as its growth weakens. Revenue increased 53% year-over-year to $895 million, ahead of Wall Street’s expectations of about $875 million. Net income rose 74% to $283 million. Advertising revenue grew 54% to $847 million while non-advertising revenue, which includes its AI data-licensing business, grew 35% year-over-year to $48 million.